Transcript No Slide Title

Organizational Theory,
Design, and Change
Sixth Edition
Gareth R. Jones
Chapter 5
Designing
Organizational
Structure: Authority
and Control
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Authority: How and Why
Vertical Differentiation Occurs
The hierarchy begins to emerge when the
organization experiences problems in coordinating
and motivating employees
 Division of labor and specialization make it hard to
determine how well an individual performs
 Almost impossible to assess individual
contributions to performance when employees
cooperate
 To deal with coordination and motivation
problems, the organization can:
 Increase the number of managers it uses to
monitor, evaluate, and reward employees
 Increase the number of levels in its managerial
hierarchy, thereby making the hierarchy of
authority taller

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Authority: How and Why Vertical
Differentiation Occurs (cont.)
 Size and height limitations

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Tall organization: an organization in
which the hierarchy has many levels
relative to the size of the organization
Flat organization: an organization
that has few levels in its hierarchy
relative to its size
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Figure 5.1: Flat and Tall
Organizations
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Figure 5.2: Relationship Between
Organizational Size and Number of
Hierarchical Levels
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Figure 5.3: Types of
Managerial Hierarchies
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Figure 5.4: Relationship Between Organizational
Size and the Size of the Managerial Component
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Authority: How and Why Vertical
Differentiation Occurs (cont.)
 Problems with tall hierarchies:
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Communication problems: communication
takes longer and is likely to be distorted

Information may be manipulated to serve
managers’ own interests
Motivation problems: as hierarchy
increases, the relative difference in the
authority possessed managers at each level
decreases, as does their area of responsibility

Less responsibility and authority could
reduce motivation
Increased bureaucratic costs: managers
cost money
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Authority: How and Why Vertical
Differentiation Occurs (cont.)
 Parkinson’s Law Problem

Argues that the number of managers
and hierarchies are based on two
principles

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
A manager wants to multiply subordinates,
not rivals
Managers make work for one another
Work expands so as to fill the time
available
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Authority: How and Why Vertical
Differentiation Occurs (cont.)
 Ideal number of hierarchical levels determined by:

Principle of minimum chain of command: an
organization should choose the minimum number of
hierarchical levels consistent with its goals and the
environment in which it operates


Keep organization as flat as possible
Span of control: the number of subordinates a manager
directly manages
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Authority: How and Why Vertical
Differentiation Occurs (cont.)
 Factors that determine the appropriate span
of control

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
Most important factor is the manager’s inability to
supervise increasing number of subordinates
adequately
There seems to be a limit to how wide a manager’s
span of control should be
Dependent on the complexity and interrelatedness
of the subordinates’ tasks


Complex and dissimilar tasks – small span of control
Routine and similar tasks (e.g., mass production) – large
span of control
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Figure 5.7: Factors Affecting
the Shape of the Hierarchy
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Control: Factors Affecting the
Shape of the Hierarchy
 Horizontal differentiation: an organization that is
divided into subunits has many different hierarchies,
not just one

Each function or division has its own hierarchy
 Horizontal differentiation is the principal way an
organization retains control over employees without
increasing the number of hierarchical levels
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Control: Factors Affecting the
Shape of the Hierarchy (cont.)
Centralization: with decentralization, less direct
managerial supervision is needed

Authority is delegated to the lower levels
Decentralization does not eliminate the need for
many hierarchical levels in large, complex
organizations

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Assists relatively tall structures to be more flexible and
reduces the amount of direct supervision needed
Standardization: reduces the need for levels of
management because rules and SOPs substitute for
direct supervision

Gain control over employees by making their behavior and
actions more predictable
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The Principles of Bureaucracy
 Max Weber designed a hierarchy so that it
effectively allocates decision-making
authority and control over resources
 Bureaucracy: a form of organizational
structure in which people can be held
accountable for their actions because they
are required to act in accordance with
rules and standard operating procedures
 6 bureaucratic principles that underlie
effective organizational structure
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The 6 Principles of
Bureaucracy (cont.)
Principles one and two establish the
organizational role as the basic component of
organization structure
 Principle one: a bureaucracy is founded on the
concept of rational-legal authority

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Rational-legal authority: the authority a person
possesses because of his or her position in an organization
Hierarchy should be based on the needs of the task, not
on personal needs
People’s attitudes and beliefs play no part in how the
bureaucracy operates
 Principle two: Organizational roles are held on the
basis of technical competence, not because of social
status, kinship, or heredity
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The Principles of Bureaucracy
(cont.)
The next three principles specify how the
process of differentiation should be
controlled
 Principle three: A role’s task responsibility
and decision-making authority and its
relationship to other roles in the organization
should be clearly specified

A clear and consistent pattern of vertical and
horizontal differentiation is the foundation for
organizational effectiveness

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Role conflict: when two or more people have different
views of what another person should do, and as a result,
make conflicting demands on that person
Role ambiguity: the uncertainty that occurs for a person
whose tasks or authority are not clearly defined
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The Principles of Bureaucracy
(cont.)
Principle four: the organization of roles in a
bureaucracy is such that each lower office in the
hierarchy is under the control and supervision of a
higher office

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Organizations should be arranged hierarchically so that
people can recognize the chain of command
Principle five: rules, standard operating procedures,
and norms should be used to control the behavior and
the relationships among roles in an organization

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Rules and SOPs are written instructions that specify a
series of actions intended to achieve a given end
Norms are unwritten
Rules, SOPs, and norms clarify people’s expectations and
prevent misunderstanding
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The Principles of Bureaucracy
(cont.)
Principle six: administrative acts, decisions, and
rules should be formulated and put in writing
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Bureaucratic structure provides an organization with
memory
Organizational history cannot be altered
When rules and decisions are written down, they
become official guides to the way the organization works
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Advantages of Bureaucracy

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It lays out the ground rules for designing an
organizational hierarchy that efficiently controls
interactions between organizational members
Each person’s role in the organization is clearly
spelled out and they can be held accountable
Written rules regarding the reward and
punishment of employees reduce the costs of
enforcement and evaluating employee
performance
It separates the position from the person
It provides people with the opportunity to
develop their skills and pass them on their
successors
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The Problems of Bureaucracy
 Managers fail to properly control the
development of the organizational hierarchy
 Organizational members come to rely too
much on rules and standard operating
procedures (SOPs) to make decisions
 Such overreliance makes them unresponsive
to the needs of customers and other
stakeholders
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Management by Objectives
 Management by objectives (MBO): a
system of evaluating subordinates on their
ability to achieve specific organizational
goals or performance standards and to
meet operating budgets
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Step 1: Specific goals and objectives are
established at each level of the organization
Step 2: Managers and their subordinates
together determine the subordinates’ goals
Step 3: Managers and their subordinates
periodically review the subordinates’ progress
toward meeting goals
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The Influence of the
Informal Organization
 Decision making and coordination frequently take
place outside the formally designed channels as
people interact
 Rules and norms sometimes emerge from the
interaction of people and not from the formal rules
blueprint
 Managers need to consider the informal structure
when they make changes as it may disrupt informal
norms that work
 Informal organization can enhance organizational
performance
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IT, Empowerment, and
Self-Managed Teams
 The use of information technology (IT) is
making it easier to cost effectively design
structures to control subordinates based on:


Empowerment
The use of teams
 IT provides people with the information they
need at all levels
 IT is encouraging decentralization and use
of teams
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IT, Empowerment, and
Self-Managed Teams (cont.)

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Empowerment: the process of giving employees
the authority to make important decisions and to
be responsible for their outcomes
Self-managed teams: self-lead work groups
consisting of people who are jointly responsible
for ensuring that the team accomplishes its goals
Cross-functional teams: groups of employees
from across an organization’s different functions
who are empowered to direct and coordinate the
value-creation activities
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